Panel to Quiz Clinton's '96 Campaign Chief on Stock Gift

By DON VAN NATTA Jr.

Published: November 4, 1997

WASHINGTON, Nov. 3—
It began with billionaires from Asia and Chinese restaurateurs from Arkansas and moved to Buddhist nuns from California and American Indians from Oklahoma. Now, the dispute over campaign financing has shifted to a most unlikely person: a 13-year-old schoolboy, and the story of his $20,000 windfall.

The Republicans want to know why Zachary Knight, the son of a lobbyist, Peter S. Knight, was given nearly $20,000 in stock by William M. Haney 3d, the chairman of Molten Metal Technology Inc., a Massachusettes environmental-technology company. The gift from Mr. Haney and his wife came just two weeks after Mr. Knight was named chairman of the Clinton-Gore re-election campaign in May 1996.

Republican investigators say they believe the gift was a form of payment to Mr. Knight, who had worked as a $7,000-a-month lobbyist for Molten Metal before becoming campaign chairman. Before voluntarily giving up his job as a lobbyist, Mr. Knight had helped the company win $32 million in Federal grants while urging its executives to contribute and raise $132,000 for the Democrats and President Clinton's re-election effort.

In an interview today, Mr. Knight said the 644 shares of stock were being held in trust for his son, a freshman at a private school here. ''Speaking as a father,'' Mr. Knight said, ''I am deeply disappointed that my 13-year-old son has been unnecessarily brought into the political fray surrounding these matters.''

Republicans on the House Commerce Committee contend that the firm's campaign contributions to the Democrats and Mr. Knight's connections helped it win lucrative contracts for its hazardous waste cleanup technology from the Clinton Administration's Energy Department.

The committee will explore the case at a two-day hearing Wednesday and Friday.

The Republicans plan to ask Mr. Knight whether he improperly used his 20-year friendship with Vice President Al Gore to help Molten Metal win Government contracts and organize Mr. Gore's enthusiastic visit to the firm's plant in Fall River, Mass., in April 1995. Mr. Knight was a top aide for Mr. Gore when he was a senator from Tennessee and led his 1988 presidential campaign.

Most of all, the Republicans will quiz Mr. Knight about the spectacular success that he enjoyed as a lobbyist for Molten Metal from 1993 to 1996 at the same time that he was soliciting campaign contributions from the firm and its executives on behalf of the Democrats.

''I have never talked to Vice President Gore about any Federal contract for any client,'' Mr. Knight said today. ''And I never arranged a Government contract or grant in consideration for any type of campaign contribution.''

Although Republicans investigating the matter insist there is evidence that Molten Metal was rewarded by the Federal Government for its generosity to Mr. Knight and the Clinton-Gore campaign, they privately acknowledged that demonstrating that in a public forum poses a significant challenge.

For example, the Republicans on the Senate Governmental Affairs Committee chose not to focus on the matter during its hearings that ended last week because several committee lawyers concluded that the facts and issues were too murky and complicated. That task was left to the House Commerce Committee.

But even the lawyers for the committee acknowledged in an internal memo obtained by The New York Times that it will be a challenge to make a strong case of improper political influence.

''There is no smoking gun,'' committee lawyers Mark Paoletta and Tom DiLenge wrote to the House subcommittee's chairman, Representative Joe L. Barton of Texas on Oct. 20.

But today, Christina Gungoll, deputy director of communications for the House Commerce Committee, said: ''There may not be a smoking gun, but it sure is hot, and it has Al Gore's people's fingerprints all over it.''

Molten Metal was originally awarded a $1.2 million competitive grant by the Department of Energy during the Bush Administration to help defray the costs of its experimental process that neutralizes toxic wastes in a bath of molten iron.

Since 1993, the company has invested $22 million of its own money to develop the technology, and received $32 million in Government grants with Mr. Knight's help. The company's technology represents one of 780 new technologies designed to help clean up enormous stockpiles of hazardous and radioactive wastes in the United States. The Department of Energy has spent $2.8 billion to subsidize the various technologies.

The committee has documents showing that some scientists, including several career employees at the Department of Energy, had doubts about the technology's effectiveness and objected to further Government grants to Molten Metal.

The Republicans plan to argue that Molten Metal won most of its grants because Mr. Knight used his ties to Mr. Gore and because the firm and its employees contributed heavily to the Democratic Party. Mr. Haney is a longtime supporter of Mr. Gore. In the spring of 1994, he gave $50,000 to help endow a chair in environmental studies at the University of Tennessee to be named after Mr. Gore's sister, Nancy Gore Hunger, who died of lung cancer in 1984. Mr. Knight had helped raise more than $200,000 to endow the chair.

In a thank you letter, Mr. Gore called Mr. Haney ''a great friend.'' Mr. Haney did not return telephone calls today.

The hearings this week will focus on the timing of some of Molten Metal's campaign contributions to the Democrats and the awarding of grants by the Department of Energy. Twice, the Government awarded multimillion-dollar grants to Molten Metal within days of large political gifts from the firm or its executives.

The timing ''was nothing more than a coincidence,'' said Mr. Knight, a partner in the Washington firm, Wunder, Knight, Levine, Thelen & Forscey. But the Republicans call it an ''incredible coincidence.''

Indeed, the Republicans will try to show that Mr. Knight helped arrange for Mr. Gore to visit Molten Metal's plant in Fall River, Mass., to commemorate Earth Day in April 1995. At the ceremony, Mr. Gore described the company's hazardous waste cleanup technology as ''a shining example of American ingenuity, hard work and business know-how.''

Mr. Haney was impressed.

''I should have asked for the Pope or the Stones,'' Mr. Haney wrote in a thank you letter to Mr. Knight. ''You hardly seemed to break a sweat in bringing the Vice President to Fall River.''

Republicans say the letter demonstrates that Mr. Knight set up Mr. Gore's visit, which contributed to a doubling of the stock price in the months afterward. In November 1995, seven months after the visit, Mr. Knight exercised 4,000 options of Molten Metal stock worth $90,000 before taxes.

Disputing the Republicans' contentions, Dr. John Gibbons of the White House Office of Science and Technology said today that he selected Molten Metal as a site after first reading about the company in a Business Week article in 1994. The first choice for the Earth Day celebration was the South Lawn of the White House, Dr. Gibbons said, but it had to be moved when President Clinton was unable to attend because of a scheduling conflict. The President must attend all South Lawn events.

''We just felt it was an ideal site,'' Dr. Gibbons said of the Molten Metal plant. ''I don't think I have even met Peter Knight, and I didn't know there were any other connections there. We were unaware of any political or charitable contributions by the company.''

Dr. Gibbons recalled today that Mr. Gore was at first skeptical about holding the ceremony at the company, asking that his aides be certain it used ''good technology.''

In May 1996, shortly after Mr. Knight began working as chairman of the Clinton-Gore campaign, Mr. Haney, the chairman of Molten Metal, and his wife gave nearly $20,000 in stock to Zachary Knight. Mr. Knight said today that Mr. Haney, ''an old friend,'' often gave stock to children of his friends.

Democrats on the committee and friends of Mr. Knight said the Republicans are trying to use this week's hearings to attack Mr. Knight, who has been mentioned as a candidate for chairman of a Gore presidential campaign in 2000 and to do political damage to Mr. Gore.

But Mr. Knight would not address those issues today.

''I'm proud of the work that I did for Molten Metal Technology,'' Mr. Knight said. ''It is a very exciting technology that was supported by Nobel laureates, by corporate America, by Republicans and by Democrats. And the Government has gotten a good deal for its money.''

In their internal memo, the Republican lawyers described the reasons for conducting a hearing on the matter: ''It brings public scrutiny to a very questionable series of events, it forces the key players to deny allegations of misconduct under oath, it shows that this Committee is serious about its investigation, it hopefully will serve as a warning to political appointees that directing contracts to campaign contributors is simply unacceptable and will likely generate enormous press coverage.''

Thomas Grumbly, the former assistant secretary for environmental management at the Department of Energy who oversaw the awarding of many of the contracts to Molten Metal, served briefly in 1988 as interim coordinator in New Hampshire for Mr. Gore's Presidential campaign. Mr. Grumbly also worked on the Clinton-Gore 1992 transition team at the request of Mr. Gore and Mr. Knight.

But even the Republican lawyers on the committee conducting the hearings are aware of the potential problems.

''Finally, and not surprisingly,'' they wrote, ''we have not uncovered any intervention or interference on the part of the Vice President (or his office)'' regarding Molten Metal's contracts with the Federal Government.